$~R76
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: September 09, 2014
+ ITA 161/2002
COMMISSIONER OF INCOME TAX-DELHI ..... Appellant
Through: Mr.N.P.Sahni, Sr.Standing Counsel with
Mr.Nitin Gulati, Advocate
versus
SUBHASH CHAND RASTOGI ..... Respondent
Through: None
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE V. KAMESWAR RAO
SANJIV KHANNA, J (ORAL)
1. By order dated 18.03.2003, the following substantial question of law was
framed in this appeal filed by the Revenue which pertains to the Assessment
Year 1991-92:-
"Whether there was any material before the Tribunal to hold that
the assessee was entitled to deduction under Section 80HHC of the
Income Tax Act, 1961, in respect of alleged export of zinc oxide?.
2. The impugned order dated 20.11.2001 of the Income Tax Appellate
Tribunal (,,Tribunal for short) was passed in ITA No. 5350/DEL/94.
3. We have heard the counsel for the appellant-Revenue, but, there is no
appearance on behalf of the respondent-assessee.
ITA No. 161/2002 Page 1 of 8
4. The respondent assessee an individual in his return of income filed on
31.10.1991 declared taxable income of Rs. 20,000/- after claiming deduction of
Rs. 45,51,898/- under Section 80HHC of the Income Tax Act, 1961 (,,Act for
short) on account of export of Zinc Oxide. The Assessing Officer disallowed
the deduction under Section 80HHC on export of Zinc Oxide on two grounds;
(i) the export had been to Nepal and therefore, was not eligible under Section
80HHC of the Act and (ii) Zinc Oxide was a mineral and thus, Section 80HHC
of the Act would not be applicable.
5. The Commissioner of Income Tax (Appeals) (,,CIT(A), in short)
reversed the said finding holding that Zinc Oxide was not a mineral but an
inorganic chemical and secondly that the export had been routed through Nepal
on the instructions of the importer at Hong Kong. He held that the export was
made to convertible foreign exchange area.
6. Aggrieved by the order of the CIT(A), Revenue preferred an appeal
before the Tribunal. On the question whether export was made to Nepal or
through Nepal, the findings of the Tribunal are recorded in paragraphs 3 and 4,
which, for the sake of convenience, are reproduced below:
"3. Ground No. 1 relates to the alleged error of the
CIT(A) in directing the assessing officer to allow
deduction under section 80HHC of the Act on the
alleged export of zinc oxide. It has been argued by the
learned DR that the finding of the learned CIT(A) that
the above goods were routed through Nepal on
instruction from Hongkong party over looking the fact
ITA No. 161/2002 Page 2 of 8
that basic evidence of custom authorities of Indian
Government, Nepal Government and Hongkong has not
been filed either before the assessing officer or before
the CIT(A), evidencing export of goods. Even Nepal
exports its goods via India. It has been observed by the
assessing officer that some of the details filed by the
assessee revealed that he has sent goods to Nepal are
not eligible for deduction under Section 80HHC of the
Act. At page 3 he has enumerated at Sl. No. 2 item zinc
oxide, Bill No. 180 dated 18.2.1991, amount of Rs.
35,81,026/- date of realisation 21.9.1991 and amount
realised Rs. 45,51,898/-. Against this order of the
assessing officer, the assessee went in appeal before the
CIT(A) who allowed the appeal of the assessee and
directed the assessing officer to allow deduction under
Section 80HHC of the ACT in respect of the items of
export including zinc oxide at Sl. No. 2 in para 2 of the
CIT(A)'s order. It has been argued by the learned DR
that goods were exported via Nepal. The export goods
first left from India to Nepal. Hence deduction under
Section 80HHC is not available to the assessee and the
CIT(A) has wrongly allowed the same. The assessing
officer has also disallowed the claim of the assessee
under Section 80HHC on the ground that zinc oxide is
not a mineral. It has been vehemently argued by the
learned AR of the assessee that the appeal of the
revenue does not survive since in the case of Shri
Narendra Rastogi, Appeal No. 175/94-95 has been
decided by the same CIT(A) Shri K.K. Kapila vide order
dated 16.6.1994 in which the claim of the assessee has
been allowed under Section 80HHC for the same zinc
oxide export via Nepal against which the revenue has
not gone in appeal. Hence this appeal does not survive
on the same facts, circumstances and law. The learned
AR of the assessee has also argued that zinc oxide is
chemical and not a mineral and all export have been
made to hard currency area. It has been further argued
by the learned AR that the assessee has complied with
all the terms and conditions of dispatch of the goods.
They have also got the confirmation from Hongkong
regarding receipt of goods. They have also furnished
incorporation/Registration Certificate of their buyer in
support of the existence before the CIT(A). Details of
ITA No. 161/2002 Page 3 of 8
export sales have been given by the assessee on page 15
of the Paper Book in which Invoice No. 5/90-91 dated
28.1.1991 of zinc oxide has been shown to be exported
to True Field Ltd., 903 Kowloon Centre, Hongkong for
US$ 176400.00 and amounting to Rs. 35,81,026/-. The
date of realization is 21.9.1991. At page 16 of the Paper
Book details of export realisation for the assessment
year 1991-92 have been given regarding the same zinc
oxide. At page 18 of the Paper Book is the copy of
Shipping Bill for the goods Indian produce in which the
consignee's name has been described as M/s. True Field
Ltd., Hongkong. Photostat copy of the Bank Realisation
Certificate has also been filed at page 20 of the Paper
Book. Copies of purchase order and confirmation
regarding receipt of goods in Hongkong have been filed
at pages 29-30 of the Paper Book. The learned DR has
relied on the Circular No. 575 dated 31.8.1990 in which
it is contained that, "With a view to removing any
doubts in this regard, it is reiterated that the expression
"convertible foreign exchange" in the above mentioned
provisions of the Income Tax Act, also includes the
amounts received in non-convertible rupees from
bilateral account countries and receipts in Indian
rupees under Government to Government credit.
However, it does not include remittances from Nepal
and Bhutan.
4. After having heard the rival submissions and
considering the material available on record, we are of
the view that the goods have been exported to Hongkong
through Nepal and not to Nepal. Hence the circular is
not applicable on the facts and circumstances of the
case against the assessee. All the documents and
certified copies have been filed by the assessee. Hence,
we do not find any justification to interfere with the
order of the learned CIT(A) which deserves to be
confirmed and the same is confirmed. Thus both the
grounds of appeal are disposed of accordingly".
7. A reading of the aforesaid finding would indicate that the export was in
fact made to a Hong Kong party whose name and details stand mentioned. The
ITA No. 161/2002 Page 4 of 8
export proceeds were specified in U.S. Dollars. The Bank Realisation
Certificate was filed and upon receipt converted into Indian Rupees.
8. The paper-book referred to in the order of the Tribunal has not been filed
by the Revenue before us and we, therefore, cannot comment on the contents of
the documents and what was stated and apparent from them. Revenue, being
the appellant before us, should have placed the said documents on record,
specially when the plea taken is that the decision of the Tribunal is factually
perverse. As noticed, no specific question of perversity stands framed while
admitting the appeal. It is also not clear whether the aforesaid documents were
not filed before the Assessing Officer, as is argued. The Assessing Officer had
denied entire claim under Section 80HHC of the Act including claim on exports
of Brass Artware and Readymade Garments and this factum has been adversely
commented upon by the CIT(A), who has recorded that the documents and
details have been filed before the Assessing Officer but were ignored and not
adverted to. Hence, on the first stand, we are not inclined to interfere with the
order passed by the Tribunal.
9. However, learned counsel for the appellant-Revenue is correct that the
Tribunal in the impugned order, has not considered their contention that Zinc
Oxide is a mineral and therefore in terms of Sub-Section (2) to Section 80HHC
of the Act, the export proceeds were not eligible. Our attention was drawn to
Sub-clause (ii) of Section (b) to Section 80HHC, which states that the Section
ITA No. 161/2002 Page 5 of 8
would not apply to minerals and ores other than processed minerals and ores
specified in the 12th Schedule. It is stated that processed Zinc Oxide was not
included in the 12th Schedule. Senior Standing Counsel has filed before us
articles and extracts from books and internet to submit that Zinc Oxide widely
considered to be a mineral in its purist form, yet to be thoroughly accurate, it is
an inorganic chemical compound with varying chemical properties depending
upon the application or use. Zinc Oxide, it is opined could never and cannot be
used directly in the extracted form as a raw mineral and must undergo some
synthetic chemical process to purify and alter its mineral structure. This
compound in particular in crystallized form is primarily used in mineral make
up and products of like nature. It is a sun blocker.
10. The order of the Tribunal, on the said issue and question is silent and
does not deal and answer whether the product exported was a mineral or an ore
and whether the product was a processed mineral or ore as specified in 12th
Schedule. The contention of the Revenue is that this product is not mentioned
in the list of processed mineral and ores specified in the 12th Schedule. What
was exported, whether it was mineral in the pure form or was it a processed
mineral or something else, is primarily a question of fact and this had to be
decided and determined by the Tribunal. They are the final fact finding
authority. We have already quoted paragraphs 3 and 4 of the order of the
Tribunal. These are the only finding/discussion. The Tribunal, therefore, has
ITA No. 161/2002 Page 6 of 8
not examined the aforesaid aspect though relevant and important to the issue in
question.
11. We record that the counsel for the Revenue has relied upon the decision
of the Supreme Court in Gem Granites Vs. Commissioner of Income-Tax,
[2004] 271 ITR 322 and Stonecraft Enterprises Vs. Commissioner of Income
Tax, [1999] 237 ITR 131 on the question of what would and should be
considered to be a mineral, mineral oil etc. Reference is also made to the
decision of the Karnataka High Court in Mithy Granite (P.) Ltd. Vs. Income
Tax Officer, [2004] 266 ITR 151 in which, again the question of what is
,,mineral has been examined and elucidated.
12. In these circumstances, we have no option but to answer the question of
law framed above in favour of the appellant-Revenue, but with an order of
remand to the Tribunal to decide the issue whether the exported goods were a
"mineral" and therefore, not eligible for deduction in view of Section 80HHC
(2)(b)(ii) of the Act. The issue and contention whether the product were
processed mineral and whether it would be eligible for deduction in terms of
12th Schedule is also an aspect which will have to be considered. In case, the
stand of the respondent-assessee is that it was not a mineral or processed
mineral, but a different product, again, the issue of fact will have to be
considered and answered. It is in these circumstances that we have passed an
ITA No. 161/2002 Page 7 of 8
order of remand. The appeal is accordingly disposed of. There will be no order
as to costs.
SANJIV KHANNA, J
V. KAMESWAR RAO, J
SEPTEMBER 09, 2014/akb
ITA No. 161/2002 Page 8 of 8
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